Compliance Update: The mass changeover

The FCA welcomed firms to apply for Consumer Credit authorisations and a change of permissions.

Existing firms with interim permissions should have now had letters from the FCA telling them when they should apply, which will be a three month time slot in which to submit. Firms failing to submit within their time slot will lose permissions. The FCA will send out reminders but firms shouldn’t underestimate the time it will need to prepare its application. Firms cannot apply early without seeking FCA approval to do so.

So what happens if you need to apply now as a new firm or change your current CC interim permissions?

The FCA will take new applications at any time, but it can take up to six months to process them if they are complete and 12 months if they are not. It is worth noting that the regulator will prioritise complete and good quality applications, so a poor application will take some time before being allocated a case officer. This is the same scenario they now use for all applications they receive.

For changes of interim permissions, the FCA will consider each case on its merit but you may have to make an application to bring forward your full application at the same time. Like new applications it could take six months for a ‘complete’ application/variation to get through the system although the FCA hope to deal with many of them much quicker.

Applications will all be online via the FCA’s new system. This has been designed to try to reduce the number of errors as there are some checks built into the system. This, of course, only covers the actual information normally captured on forms and not the quality of supporting documentation such as the business plan, systems and controls, etc.

There will be a significant number of firms applying for new permissions and variations in the next few months as firms get to grips with what permissions they should have to be compliant. This will cover many firms which introduce to a credit intermediary or lender and don’t have a licence (even where no payment is due for the introduction). A typical example may be a regulated mortgage broker who introduces a buy-to-let mortgage to either a packager or lender.

Whilst they don’t need consumer credit permissions when dealing with a regulated mortgage they do for consumer credit exempt mortgages, i.e. buy-to-let, high net worth and predominantly for business purpose loans. The loan could be unenforceable if the introducer or packager doesn’t hold CC permissions. They don’t need them for loans outside of the Act, such as loans to limited companies or partnerships of four or more.

Expect to see more lenders turn business away as they realise the risk of not having all parties involved having CC permissions! This will, in turn, drive more firms to find they need to apply to the FCA for CC permissions.